‘Nigeria’s economy resilient’

Moody’s Investors Service said Nigeria’s economy remains resilient in the face of falling oil prices even as the currency slumped to a record low and growth in Africa’s largest crude producer is set to slow.

That’s in line with forecasts from the International Monetary Fund (IMF) and the government’s revised estimate of 5.35 per cent.

The West African nation’s government relies on crude exports for about 70 per cent of its income and 95 per cent of foreign exchange earnings, leaving it vulnerable to price and quantity shocks. Finance Minister Ngozi Okonjo-Iweala is seeking to cut spending in next year’s budget by eight per cent to 4.36 trillion naira ($23.9 billion) as revenue plunges.

“Nigeria benefits from a resilient economy and robust fiscal position, although the recent drop in oil prices will likely put pressure on public finances and could lead to the widening of fiscal deficits,” Moody’s said. Spending cuts and taxes on non-oil industries may help to close the gap, it added.

Oil prices have slumped 45 per cent in the past six months, eroding foreign-currency reserves and forcing the Central Bank of Nigeria (CBN) to devalue the currency for the first time in three years. The naira fell 1.3 per cent to 182.35 per dollar on the interbank market as of 4:10 p.m. in Lagos, the commercial capital yesterday.

Nigeria’s government debt, which is “very low” at 13.2 per cent of gross domestic product (GDP), will probably increase to 14.6 per cent in 2015, Moody’s said.

As a proportion of government revenue, debt is set to rise to 130 per cent from 121.8 per cent, it said. Both ratios are low compared to market peers rated Ba3, according to Moody’s.